International marketing 3

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14SALES MANAGEMENT

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CASE 14-1 HILTON UNIVERSITY—FOR EMPLOYEES ONLY!

Products-based multinational firms with worldwide opera- tions, and therefore a diverse workforce, face a major task training employees in different regions in order to maintain a uniform organizational culture throughout the global com- pany. But for multinational service firms, maintaining an edu- cated, well-trained workforce is even more challenging. That is why many service firms have made it a priority to establish training programs. Take the hospitality industry for example. Before the World Wide Web era, these training programs used to be face-to-face and were carried out in various foreign loca- tions. The downside of this form of classroom instruction was costs, time, and the wide disparity in teaching methods in dif- ferent places. Today, however, more and more global service firms are taking their classrooms online. Not only does this form of training lower overall costs but it also attempts to transfer the image of corporate culture.

The premier hotel group Hilton International launched its Hilton University in 2002, solely for training and educating its global employees. Prior to this initiative, employee training was conducted on every Hilton hotel’s premises in more than 65 countries. Needless to say, the costs of training, time taken, and the training programs differed to a certain extent based on location. In addition, not all of Hilton’s hotels are owned by the company. Some hotels are managed by outsiders. The com- pany felt the need to consolidate employee training and intro- duced online training. Another reason for establishing Hilton University was that corporate headquarters felt the need to monitor and control training programs, mainly the content of the training program and its effect on employee skills.

Hilton University conducts several different online train- ing programs. Its employees worldwide are expected to get training for at least 40 hours in a year. One of the busi- nesses’ primary needs is the ability of its hotel staff to effec- tively communicate with its customers. Given that many of its hotels are located in non-English-speaking countries, its train- ing in English has become one of its most important programs. Hilton’s main clientele consists of high-income, educated trav- elers, who are willing to pay a premium for good service and comfort. A large number of its patrons are also from its home country (the United States). Hence, a majority of its customers

are English speaking, and with the establishment of Hilton University, the company announced that English would be its official language for conducting business in all parts of the globe.

Accordingly, Hilton University started an English course. It uses GlobalEnglish, the leading online English learning and service provider for business communication. This course pro- vides an engaging and personalized user experience that has students on their way to speaking and writing English in no time at all. Another reason for the introduction of this course was that the company wanted to create an organization culture of shared beliefs about the company and for employees to be able to share knowledge, information, and ideas.

The results of the English training program were good. GlobalEnglish is used by many team members of Hilton to improve their proficiency in English. On average, more than 75 percent of Hilton’s foreign employees commended the program and claimed that it had given them the necessary language skills to be able to confidently perform their jobs. Better communication with guests improves their satisfaction, a good way to greet guests more often as they come back. As mentioned earlier, Hilton had set a target of 40 hours per employee, but the number of hours actually clocked in by employees exceeded the target by 10 hours on average.

Since 2005, Hilton University has offered more online lan- guage learning, including French, Spanish, Italian, German, and Dutch. However, most of the courses other than language courses provided by Hilton University are still in English. Since less than 10 percent of Hilton’s foreign staff is flu- ent in English, most of these courses are not comprehensi- ble to the majority of its employees. A possible solution to this problem is to introduce courses in different languages. In addition to the complexity of this task, the company was unable to provide similar learning opportunities to its non- English-speaking staff.

In spite of the problem of course language, Hilton Uni- versity has still witnessed large successes. From 2002 to 2005, nearly 10,000 Hilton people completed over 100,000 e-Learning programs; 93 percent of these learners said that they would recommend this form of learning to their friends

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2 • Case 14 • Sales Management

and colleagues. The strongest “likes” were the chance to learn at a time, place, and speed that suited the learner.

Boosted by the success of its online programs, Hilton Uni- versity has introduced several others that the company expects to increase employee productivity and improve service at its hotels all over the world. This initiative by the company has also raised its image in the eyes of employees, and the company has gotten much closer to its objective of maintaining a global service-oriented organization culture.

Source: John Guthrie, “Hilton International: Creating a Global Ser- vice Culture,” Chief Learning Officer, 4 (January 2005), pp. 54–56.

DISCUSSION QUESTIONS

1. Should the salesforce of service multinationals have a global service strategy like Hilton’s or should it be more locally oriented to serve the needs of regional customers? Why? 2. How is salesforce training in manufacturing firms different from training in service firms? 3. What are the pros and cons of online training versus face-to-face classroom-based training?

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CASE 14-2 LET’S HAVE SOME SWEDISH FLAVOR AROUND THE WORLD!

IKEA has been known across the world as the leader in the home furnishing industry. Established in 1943 in the small vil- lage of Agunnaryd in Sweden, IKEA Group has grown into a global retail brand with 131,000 coworkers in 41 countries gen- erating annual sales of more than 24.7 billion euro. IKEA has progressively expanded into international markets in the past 25 years. As of August 2011, there were IKEA stores in more than 38 countries, with 287 stores in 26 countries belonging to the IKEA Group. The top 5 selling countries by 2011 were Germany 15 percent; the United States 11 percent; France 10 percent; Italy 7 percent; and Sweden 6 percent. In 2011, the IKEA Group stores had 655 million visits.

In managing its international operations, IKEA’s manage- ment has largely followed the IKEA way along with its strong Swedish flavor. This is based on the belief that its way of man- aging people has universal appeal and thus can be accepted in most cultures. Regardless of nationalities, IKEA employ- ees prefer to have cooperative informal relations, a tolerant approach to others as well as being independent. In man- aging its international operation, IKEA employs Swedish expatriates all over the world. Their duties overseas are not just running the stores and distribution systems. Swedish managers in IKEA are expected to be the ambassadors of IKEA and Swedish values and therefore must educate their non-Swedish coworkers in such values. The main challenge for IKEA in its expatriation management is to find Swedish IKEA managers who are willing to be dispatched overseas for a long period of time. To overcome this problem, IKEA had to hire Swedish managers from outside IKEA.

In general, three main facets of Swedish culture include love of nature, individualism through self-development, and equality. Individualism in the Swedish sense is different from the American sense. U.S. individualism often involves the competitive thrust of corporate life, while Swedish individu- alism is connected to a person’s own self-development and time to himself or herself and sometimes can lead to insu- larity. Work centrality is not high, and there are cases where managers complain about employees’ unwillingness to work overtime. The value of equality in Swedish culture is expressed through a welfare system that provides the same service to

everybody in health service, child benefits, maternity/paternity leave, pensions, and so on. High taxes serve to support these systems and play a role as a leveler of social inequalities. In corporate life, equality has been reflected in lower hierar- chies and participation in decision-making.

This particular Swedish character of equality is strongly represented in IKEA’s internal organization. Management style is informal, open, and caring. Hierarchy is relatively flat, with three levels of responsibility at store level between store manager and “coworkers” (employees or “associates”). Some other egalitarian approaches in the management practice of IKEA include decision-making by consensus; pragmatic prob- lem solving; titles that are not given on manager’s business cards; bureaucratic procedures and status barriers are dispar- aged; managers are expected to be close to coworkers, and not to take themselves too seriously.

While it was easy to translate IKEA’s strong Swedish fla- vor to the Netherlands, that was not the case with Germany, France, and the United States. Although IKEA has been in Germany for over two decades, the Swedish management is still perceived as unusual by Germans. Germans are precise, very disciplined, and formal. They readily take orders from their superiors. What the boss tells must be done exactly the way it was told. Everything must be put down in writing. Swedish management is also seen as not sufficiently assessing risks before taking action. Germans prefer formal procedures because administration provides them with security.

In France, there is a tendency to judge informality as a sign of weaknesses and indecision. Almost like Germans, French are accustomed to formal rules and strong hierarchy. IKEA’s French manager once stated: “Working here isn’t for everyone. It is difficult for someone over 35 because this place is different from the others in France. When you join IKEA, you enter another world: we do not behave like a normal French company. Status is not recognized, which can cause an identity problem: everyone is put on the same level—no one stands out, and you can get lost in the crowd. It is hard to explain what IKEA is, everyone will give a different answer, one shouldn’t freeze the system, it is flexible, it should stay that way.”

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Short Cases • 3

Recently, IKEA has frequently stated its desire to open stores in India—a culturally and economically very different country—as part of a wider expansion in emerging markets. In June 2012, IKEA was planning to invest up to 600 million euros ($757 million) in India as the first stage of a long-awaited move to the country. The company was asked to conform to a requirement by India’s government, that it locally source some of the supplies. As widely known, IKEA has its own way of handling the business across the world. Although the company stated that it could “live up to the guidelines” that require 30 percent of its supplies to be sourced locally, IKEA said it still would be a challenge in the long term as it would have to rely heavily on local personnel for procurement (buying) as well as selling. Some observers argue that IKEA’s future presence in India may bring challenges to the company from

Sources: Terence Jackson, “The Cross-Cultural Organization: The Multicultural Model,” Chapter 1 in International HRM: A Cross- Cultural Approach (Thousand Oaks, CA: SAGE Publications, 2002), pp. 176–196; P.C. Grol and C. Schoch, “IKEA: Culture as Competitive Advantage,” in G. Oddou and M. Mendenhall, eds., Cases in Interna- tional Organizational Behavior (Malden, MA: Blackwell, 1998); “Ikea in €600m India Push,” Financial Times, June 22, 2012; and IKEA 2011 Yearly Summary, www.ikea.com.

the perspective of cross-cultural management issues; while others are optimistic that IKEA’s venture in India will be smooth—both business-wise and culture-wise. Nevertheless, IKEA once again needs to address the issue of the extent to which its Swedish flavor should be stretched in order to con- tinue to grow in the global market.

DISCUSSION QUESTIONS

1. Discuss IKEA’s problems in Germany and France from the perspective of cross-cultural management. Use Hofstede’s culture dimensions in your analysis. 2. Do you think IKEA should continue to emphasize its strong Swedish flavor when expanding internationally? To what extent do you think IKEA should maintain standardiza- tion versus adaptation in terms of sales team management? 3. As an international marketing consultant, what advice would you suggest to IKEA if it were to open new stores in your country? What are some particular aspects of culture to which they must pay more attention? 4. In terms of cultural issues, what is your prediction of IKEA’s future venture in India? What could be potential cultural problems in managing people in India?